Myths about the housing market corrected, it’s not the fault of the baby boomers.

Perhaps the fact that 18% of the population live in private rental accommodation is one of the most depressing statistics produced about contemporary UK society. Many of these in private rental accommodation are the young and anybody with adult children know how toxic for future hopes are the combination of high rents and insecure tenancies. We are a society that is turning its back on the less well off, be they the young, the working poor, the unemployed and the disabled. The seventh richest country in the world is content to see increasing numbers of its population condemned to housing misery.

The reasons usually given for this trend, that the older generations are buying houses to rent as pension substitute, the introduction of the Assured Shorthold Tenancy Scheme are merely symptoms of a wider societal change, that is the drift into a more unequal society, in which wealth holders are always at an advantage over income earners. Wages since 2003 have remained largely static, while property prices have resumed their upward trajectory, meaning any existing householder finds it easy to get a mortgage and has little difficulty in outbidding any first time buyer.

This problem is compounded by fact that a third of our MP’s are buy-to-let landlords, who rather than do anything to resolve the problem, choose to exploit it for personal gain.

Can I suggest the solution is the one suggested by that doyen of free marketeers Milton Friedman; that is control the money supply to stop house price inflation getting out of control. In a recent article Simon Jenkins stated that bank debts total five times the GDP and a large proportion of that excess money has gone into inflating house prices. All politicians need to do is look at the Bank of England rule book for the 1960’s to see how this excessive money supply can be controlled.

For those that have an interest in economics can I suggest quick glance at Milton Friedman, unfortunately I cannot remember the exact title but it was a Penguin book. There he demonstrates how excessive money supply can cause inflation. His example is the Virginia Tobacco farmers of the early American state. There due to a shortage of dollar coins, tobacco was used as a currency. Unfortunately farmers soon realised that it was more profitable to grow large quantities of poor quality tobacco, than smaller qualities of good tobacco, which buyers really wanted. Consequently the market was flooded with poor quality tobacco that nobody wanted and so prices in terms of units of tobacco went through the roof. Tobacco had then to be discarded as a unit of currency, as it was near to becoming worthless.

This is the copy of a letter I sent to a national newspaper, while I have had several letters published in the past, I have no guarantee that this will be published so I am blogging it in hope of getting a wider audience.


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